Riding out the volatility of growth stocks, especially amid a challenging broader market takes patience, and a long-term investment approach. But sometimes investors need a little extra something from a growth stock in order to consider it for their portfolio.
Bristol Myers Squibb (BMY 0.89%) is a biopharma company with a broad mix of therapies focused on treatment in the areas of hematology, oncology, cardiovascular, immunology, fibrotic, and neuroscience. It is also the kind of company that can produce gains over the long-term, and comes with a special bonus if an investor is willing to ride out a few bumps along the way.
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Growth is challenged by declining sales in its top selling drug
Bristol Myers experienced 2% growth in revenue during the second quarter on a year-over-year basis, pulling in $11.9 billion for the quarter. Some investors might consider that growth rate less than ideal. But part of what keeps investors excited is that the company was able to boost earnings to $0.66 per share -- a 40% increase on a same quarter comparison.
Where the company faces a problem is in declining revenue for some treatments including Revlimid -- it's top selling drug used to treat for Multiple Myeloma and Myelodysplastic syndromes -- and Abraxane -- used to treat cancers. Revlimid is on a year over year and sequential quarter decline, which signals that the decline is likely to continue as more generics and biosimilars hit the market. That likely decline was acknowledged by the company during its Q2 earnings call which stated that guidance for Revlimid sales is $9 billion to $9.5 billion for the full year, after generating sales of $5.3 billion during the first two quarters combined.
The good news related to Abraxane is that although year-over-year saw a decline, there was an increase in revenue from Q1 to Q2 of this year. The other good news for long-term investors is that Bristol Myers is seeing growth in revenue for top sellers like Eliquis, as well as growth in newly approved therapies. The highly touted blood thinner -- Eliquis -- used to treat those with an abnormal heart rate to avoid stroke and blood clotting brought in sales of $10.8 billion in 2021, a 17% increase over the previous year.
A promising pipeline should fill the gaps left by declining sales
Newly approved Abecma also saw a 271% year-over-year growth and 33% jump from Q1 to Q2 after receiving FDA and EU approval in 2021. This should be good news going forward as Abecma focuses on the same patient category where Abraxane showed signs of losing ground since last year.
Another product the company is big on is Breyanzi for the treatment of relapsed or refractory large B-cell lymphoma. Breyanzi has produced sales growth of 388% year-over-year comparing the first six months of 2021 to the equal period of 2022.
As new drugs and treatments make up for declines in more mature treatments, a big catalyst for 2023 is Deucravacitinib (aka Sotyktu) , an immunology drug for plaque psoriasis it acquired with its Celgene acquisition in 2019. On Sept. 10 Sotyktu received FDA approval, and according to Chief Medical Officer Samit Hirawat, the drug could result in a new standard of care which could find its way to patients as early as this month, and ultimately bring in over $4 billion in over the next seven years.
What's intriguing about the Sotyktu potential is that it could dig into the market share of leading psoriasis treatment Otezla, which was purchased by Amgen from Bristol Myers in 2019. Otezla has shown a 5% decline in sales during the start of 2022. So in this exchange of psoriasis treatments Bristol could end up the winner in a battle of pitting its newest product against its former.
Growth through acquisition is not new for the company
Bristol Myers currently has more debt than its cash can handle, but with cash flow from operations coming in at $2.3 billion for the quarter it can keep pace with its debt, allowing it to strategize on how to use that cash. Part of that strategy includes $10 billion authorized for stock repurchase remaining from an initial program total of $15 billion accelerated back in February, which means it could be planning to use its funds for expansion through acquisitions at the company level or through licensing rights to specific drugs.
Growth through acquisition would not be new for Bristol Myers. The company has made multiple acquisitions over the past few years including Celgene from 2019, and the more recent purchase of Turning Point Therapeutics earlier this year. The Turning Point acquisition highlight includes Repotrectinib, a potential best-in-class treatment for non-small cell lung cancer, which has been granted three breakthrough therapy designations and is on track to becoming FDA approved in the second half of 2023 if all goes as expected by Bristol Myers. According to Hirawat, this treatment can be a gamechanger in the standard of care, and addresses a significant unmet medical need for cancer patients.
A long-term strategy pays dividends, literally
Growth investors who put money into biopharma companies like Bristol Myers are likely looking for a long-term investment with potential for big rewards. There is often volatility within the stock price of such companies because news on clinical developments can result in quick shifts of momentum. One thing that can help offset large swings is for a company to pay out consistent dividends.
Bristol Myers has been paying out a dividend for over 50 years, and is just 3 years short of becoming a Dividend Aristocrat for increasing annual dividends 25 consecutive years. What's more is that between 2010 to 2019 the company increased annual dividends by roughly 2.5% , averaging $1.48 per share. Since 2020 the average annual increase has jumped to 9%, resulting in a projected total 2022 annual payout of $2.16 per share at a dividend yield of 3%.
So when it comes to volatility for this dividend growth stock, long-term investors would be wise to look at the full picture. A strong pipeline, cash management, and a consistent dividend can produce gains down the road as long as you can ride out the bumps along the way.
